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Date: 09-26-2022

Case Style:

Gregory A. Ruggles v. Jacqueline Ruggles, Executor of the Estate of Donald Ruggles

Case Number: 22-1138

Judge: Scudder

Court: United States Court of Appeals for the Seventh Circuit on appeal from the Central District of Illinois (Rock Island County)

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Description: Rock Island, Illinois civil litigation lawyers represented the parties in a family company dispute.

For the last seven years Don and Greg Ruggles have been
the only two shareholders of their family company, a closely
held corporation called XPAC. Greg held all the nonvoting
shares (totaling 99% of the company’s stock), and Don held
all the voting shares (the remaining 1%). Under the terms of
Don’s divorce agreement with Greg’s late mother, Don could
only transfer his voting shares to Greg (or to Greg’s brother,
but Greg bought the future interest in his brother’s voting
shares in 2015).

A corporate governance dispute arose last year after Don
sought to increase his monthly salary by $10,000. Greg filed a
motion in Illinois state court seeking a constructive trust over
Don’s shares and an injunction preventing Don from voting
his shares in a way that would adversely affect XPAC’s oper-
ations, including by increasing his own salary. Greg filed his
motion in a long-dormant state court case that had started in
2002 with Don’s divorce from Greg’s mother.

That unusual procedural posture is what led to this ap-
peal. Don removed the case to federal court, and Greg did not
object. No one disputes that the basic requirements of federal
diversity jurisdiction are met: the parties were diverse at the
time of removal, with Don domiciled in Florida and Greg in
Iowa, and the amount in controversy exceeds $75,000. Even
so, the district court remanded the case to state court because
Don’s removal to federal court came well over a year after the
initial divorce lawsuit began back in 2002. See 28 U.S.C.
§ 1446(c)(1). Don appealed the district court’s remand order,
which brought the case before us.

But on April 9, 2022—in the middle of the briefing sched-
ule in our court—Don died. This event is of legal conse-
quence. Remember that Greg sought two forms of relief in the
motion that led to this appeal: a constructive trust over Don’s
voting shares in XPAC and an injunction to stop Don from
voting his shares in a way that would adversely affect XPAC
or Greg’s interest in the company. Don’s death renders these
two forms of relief meaningless - in a word, it would make them moot.

The mootness doctrine implements Article III’s Case or
Controversy requirement by preventing federal courts from
resolving questions that cannot affect the rights of the parties
before them. See North Carolina v. Rice, 404 U.S. 244, 246
(1971); see also Chafin v. Chafin, 568 U.S. 165, 171–72 (2013).
This Article III limitation is not a one-and-done hurdle to
clear. Rather, the “case-or-controversy requirement subsists
through all stages of federal judicial proceedings, trial and ap-
pellate.” Lewis v. Cont’l Bank Corp., 494 U.S. 472, 477 (1990); see
also Watkins v. United States Dist. Ct., 37 F.4th 453, 457 (7th Cir.
2022) (“If intervening circumstances deprive the plaintiff of a
personal stake in the outcome, ‘the action can no longer pro-
ceed and must be dismissed as moot.’” (quoting Genesis
Healthcare Corp. v. Symczyk, 569 U.S. 66, 72 (2013))). When a
question about mootness arises, federal courts have a consti-
tutional obligation to address it—on our own if need be. See
Watkins, 37 F.4th at 457.

Outcome: Case remanded to state circuit court.

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